Last Week's Jobs Report Was Just What the Doctor Ordered
Mike Zaccardi, CFA, CMT | Jan 09, 2023 03:15AM ET
Last Friday's U.S. Jobs report was just what the doctor ordered. While much attention gets paid to the headline change in employment—which was a solid 223,000 gain in December—the bullish news was in the report’s details.
Average hourly earnings, a key measure of wage growth, were up 4.6% from a year ago, significantly less than the 5% consensus expectation. Weekly hours worked were also a smidgen less than forecasted—another “cool” reading on the inflation front. The unemployment rate, meanwhile, fell to its lowest level since 1969. Stocks initially rose on the news Friday morning, but then fell flat shortly after the market opened.
So, what caused the S&P 500 to soar on Friday? The Institute for Supply Management (ISM) issues a manufacturing index and a services index each month. While the manufacturing gauge has been indicating economic contraction for some time, the December services report released on Friday showed an unexpected dip below 50—the demarcation line between expansion and contraction. It was the biggest negative surprise for the services index since 2008. Within the ISM Services report, the employment, prices paid and new orders subindexes all deteriorated from the previous month.
That disappointing data will be welcome news at the Federal Reserve. The Fed’s policymakers remain fixated on taming inflation. After some “hot” employment readings earlier in the week, the soft wage growth data in December’s jobs report and the big services slowdown may allow the Fed to ease off the economic brake pedal in coming months—and that’s why investors bid up share prices on Friday.
But will the Fed scale back its inflation-fighting efforts? Next Thursday’s CPI report could be the final arbiter on whether a gentler 25-basis-point interest rate increase happens at the Federal Reserve meeting on Feb. 1—or whether a half-point rate hike is still in the cards.
***
This Humble Dollar.
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.